Valued at a market cap of $16.5 billion, Alexandria Real Estate Equities, Inc. (ARE) is a life science REIT with a particular focus on collaborative life science, agtech and technology campuses. The Pasadena, California-based company is a pioneer of the life science real estate niche and owns, operates, and develops collaborative mega campuses in AAA life science innovation cluster locations, including Greater Boston, the San Francisco Bay Area, and New York City to name a few.
Shares of this REIT have significantly lagged behind the broader market over the past 52 weeks. ARE has declined 21.3% over this time frame, while the broader S&P 500 Index ($SPX) has gained 20.7%. Moreover, on a YTD basis, the stock is down 2%, compared to SPX’s 2.2% rise.
Narrowing the focus, ARE has also trailed the Real Estate Select Sector SPDR Fund’s (XLRE) 9.5% return over the past 52 weeks and 3.8% gain on a YTD basis.
On Jan. 27, ARE released its Q4 earnings results, and its stock declined 4.8% the following day due to a mixed performance. Revenues reached $788.9 million, reflecting a 4.2% year-over-year increase but fell short of consensus estimates. The shortfall was primarily driven by the impact of California wildfires and weaker leasing activity in South San Francisco, where an oversupply and a slowdown in biotech sector leasing affected performance.
Investor sentiment was also weighed down by flat same-property NOI growth projections for 2025, influenced by upcoming lease expirations and vacancies. However, on a positive note, ARE reported an FFO of $2.39 per share, marking a 4.8% year-over-year increase and meeting Wall Street expectations.
For the current fiscal year, ending in December, analysts expect ARE’s FFO to decline 1.6% year over year to $9.32. The company’s FFO surprise history is mixed. It exceeded or met the Wall Street estimates in three of the last four quarters while missing on another occasion.
Among the 13 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on four “Strong Buy” and nine “Hold” ratings.
This configuration is slightly less bullish than three months ago, with five analysts suggesting a “Strong Buy” rating.
On Jan. 2, Jefferies analyst Peter Abramowitz maintained a “Hold” rating on Alexandria Real Estate and lowered its price target to $105, which indicates a 9.9% potential upside from the current levels.
The mean price target of $118.25 represents a modest 23.7% upside from ARE’s current price levels, while the Street-high price target of $144 suggests an upside potential of 50.7%.
